Việt Nam’s exports and industrial output have increased in recent months as the
country is considered a beneficiary of the US-China trade war, according to a VNDrect
Securities Corporation (VNDS) report. The report showed that export growth rebounded sharply in April, up 10.4 per cent yearon-year, while May’s industrial production index increased by 10 per cent year-on-year. “Despite the step-up in trade tensions, we maintain our 2019 and 2020 GDP growth forecasts at 6.6 per cent and 6.5 per cent,” the VNDS said.In the first four months of this year, Việt Nam’s export growth remained positive at 6.5 year-on-year compared with negative growth for other Asian countries, thanks to strong domestic exports, particularly textile, wooden products and solid growth in exports of tech products.
“In addition, FDI from China into Việt Nam nearly doubled from the same period last
year. We see resilient export growth and robust FDI inflows providing the country with
a buffer against further escalation in the US-China trade war,” according the report.
VNDS said that barring a full-scale trade war, this round of Chinese yuan depreciation
would be no different compared to last year because a sharper depreciation could add
more uncertainty to the trade negotiation process and was unlikely to help Chinese
authorities.
“We see less depreciation pressure on the Vietnamese đồng compared to last year,
thanks to better guidance from the State Bank of Việt Nam to the foreign exchange
market and less funding pressure from strong US dollar given the Fed’s dovishness,” the
VNDS added.
After Việt Nam was added to the US Treasury’s currency watch list for potential
currency manipulation, VNDS said Vietnamese policy makers will be more cautious on
currency management or intervention going forward. “The country is becoming more vulnerable to US policy owing to the rising trade surplus
with the US because many Chinese businesses have re-routed their goods to the US via
Việt Nam to avoid tariffs,” the report read.
VNDS said although it expects muted inflation in 2019, it still see upside risks in the
longer term due to a rebound in pork prices if African swine fever is contained and
China’s growth stimulus measures are likely to boost demand for oil and raise oil prices
amidst tighter global supply.